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Planned reform of direct tax and tax payments to be effective from 2013

Planned reform of direct tax and tax payments to be effective from 01.01.2013

In the second half of March 2011 the Ministry of Finance of the Czech Republic presented a plan for the comprehensive reform of direct tax and tax payments with the effective date planned on 01.01.2013.

The planned changes include:

• Payroll income tax will be calculated from gross wage (not from the so called super-gross wage).
• Some benefits (e.g. canteen meals, temporary accommodation etc.), which are currently tax exempted will be cancelled. Instead, the possibility of provision of unified tax abatement to employees in the amount of CZK
  3.000 per year is being considered.
• The amount of contribution of physical persons to public health and social security insurance system will be same for both types of contribution, i.e. 6,5 %. The basis for insurance contributions of self employed persons will be 100 % of the profit.

The maximum limits for payment of the annual insurance will be set:

• social security insurance
– max. 48times the average wage
• public health insurance
– from the basis max. 72times the average wage.

The payroll income tax rate shall stand at 19 %.

The basic tax abatement per payer in the amount of CZK 24.840 per year will be provided only if the tax basis of the payer does not exceed 48times the average wage.

Increase of tax abatement to maintained child by CZK 1.800 compared to current situation.

Current employer’s contribution to social security and public health insurance system will be replaced by 32 % tax from total wages.

For the corporate bodies there will be tax abatement introduced in the amount of tax deducted from dividends. This abatement may be applied in the subsequent taxation periods without limitation.

The articulated wording of the changes in respective legislation shall be submitted to the government for hearing by the end of June 2011, than the standard authorization process shall take place.

Ing. Olga Krnáčová
IB Grant Thornton
Na Bojišti 18
CZ-120 00 Praha 2
T +420 296 152 111
F +420 296 181 483
E o.krnacova@ib-gtpraha.cz